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tv   Nightly Business Report  PBS  May 9, 2011 7:00pm-7:30pm PDT

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>> i think the market is definitely turned. we won't see $110 for a little while, and really the pressure is on the downside. >> susie: experts question how long oil prices can stay at triple-digit levels. >> tom: but prices at the gas pump continue marching toward record highs. you're watching "nightly business report" for monday, may 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. oil prices are back up again, rising to $102 a barrel today. behind the price hike? signs that the global economic recovery is still on track. >> tom: susie, also concerns of supply shortages because the mississippi river is rising and could flood louisiana refineries. in new york trading at the close, crude futures rose $5.37 to $102.55, ending a five- session slide. >> susie: but despite the recent volatility in oil, retail prices
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for gasoline have stayed stubbornly high. so what can consumers expect to pay at the pump as the summer driving season begins? to answer that, we begin a series this week, "pumped up prices." suzanne pratt looks at the relationship between crude oil and gasoline prices. >> reporter: at this new york city gas station today, the price of unleaded is still well over $4 a gallon. that's despite the fact that the price of crude oil tumbled last week, part of a global sell-off in commodities. in fact, during the first week of may crude dropped 15%, yet the national average for a gallon of unleaded gas actually rose 2%. in the energy markets, what goes up doesn't seem come down with the same enthusiasm. call it the quick rise, slow fall principle. consumers think it's price gouging. paul christopher of wells fargo says consumers are part of the problem of sticky gas prices. that's because they're reluctant to shop for cheaper fuel outside of their neighborhood. >> if you're driving to work and there's a gasoline station-- maybe, say, it's on the right- hand side of the road. you might be more apt to stop at that gas station than maybe
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across the street, which would force you to make a left-hand turn into it. so, there's a certain amount of what economists call an oligopoly, or that is to say, some pricing power that goes along with being a gas station. >> reporter: it's no wonder there's an expectation that prices at the pump should move in tandem with prices in the energy pits. after all, crude oil accounts for 68% of the cost of gasoline. distribution, marketing, transportation and taxes make up the remaining 32%. take new york, for example. where taxes are high, if you fill up on the new jersey side of the holland tunnel you could save more than $10, or the cost of a pizza. oil trader anthony grisanti says consumers in all states should sit tight. >> gas prices will start to fall. i think in another week or two, you're going to start to see stations get delivery of that cheaper gas and they're going to put it out in their pumps and it's going to force other stations to adjust also. >> reporter: and, there's more good news for drivers.
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many experts predict crude oil prices will fall in the coming weeks and months. they say look for crude to trade in a range of $90 to $105 a barrel. that could mean prices at the pump will slip back below $4 a gallon. suzanne pratt, "nightly business report," new york >> susie: we continue our series "pumped up prices" tomorrow. gasoline is what brings you to the station, but that's not what brings in the biggest profits for station owners. you may be surprised when we tell you who makes more money at the pumps. >> tom: here are the stories in tonight's n.b.r. newswheel: stocks made modest gains as higher oil prices boosted the energy sector. the dow rose nearly 46 points, the nasdaq added more than 15.5 and the s&p 500 up six points. big board volume was light, settling below 800 million shares, while nasdaq volume settled under 1.7 billion shares. sheila bair is stepping down as chair of the f.d.i.c. at the end of her five-year term.
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her last day is july 8. as one of the government's top bank regulators, bair helped craft the response to the financial crisis. alex sanchez of the florida bankers association says bair's successor still faces many challenges. he hopes it's someone who knows the banking industry. >> this is a position that the president appoints, and that person has to roll up their sleeves and get to work. i think that's an important attribute. and certainly someone who has the experience of the f.d.i.c. would be an excellent choice. >> tom: standard & poor's has again cut greece's credit rating, downgrading it by two notches and raising new fears about the value of greek bonds. the new rating is the lowest yet for greece, and it's six notches below investment grade. it comes after european officials acknowledged for the first time that last year's bailout package for greece was insufficient. the powerful tornadoes and storms that struck the southeastern parts of the u.s. last month caused up to $5.5
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billion in insured losses. today's estimate, from risk modeling company air worldwide, comes as disaster personnel are still sorting through the wreckage. the $5.5 billion estimate includes insured losses to homes, cars and businesses, as well as business-interruption claims for companies that had to shut down. >> susie: the world's two biggest economies are meeting in washington, d.c. the u.s. and china. one of the goals is to allow the u.s. and china to iron out of some of their political and economic differences. on the headline issue of china's currency, there has been some progress and some unusual results. darren gersh reports. >> reporter: after adjusting for inflation, china's currency is up 10% against the dollar since last summer. that has taken some of the pressure off the trade issue, but today treasury secretary timothy giethner still urged his chinese counterparts to do more. >> in china, building on the remarkable reforms of the last 30 years, the challenge is to lay the foundation for a new
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growth model driven more by domestic demand with a more flexible exchange rate. >> reporter: u.s. and chinese economic officials are meeting under somewhat unusual economic circumstances. the two biggest economies in the world both have currencies that are falling in value. the chinese yuan has fallen 2% against most trading partners since last summer. >> it's reducing the export competitiveness of other countries. >> reporter: cornell professor eswar prasad says that's a relief to u.s. officials, who have waged a sometimes lonely battle with beijing to force the yuan higher. >> so in principle, the u.s. should have a lot more friends on its side when it comes to countering chinese currency policy, but that hasn't quite happened yet, because china is still driving world growth and everybody knows it's going to become a much larger economy, so again, nobody wants to get on the wrong side of china right now. >> reporter: while currency policy grabs the headlines, the battle behind the scenes at these talks is increasingly over access to markets.
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the u.s. wants the chinese government to make it easier for american banks and high-tech companies to compete with chinese companies. the chinese want to put their trillions of dollars of foreign reserves to work in the u.s. by buying firms and acquiring advanced technology, but alan tonelson, a well-known critic of china's trade policy, dismisses beijing's complaints that the u.s. has unfairly restricted chinese investment. >> i think this is complete public relations. the main chinese goal in this series of talks is to maintain the trade and investment status quo. >> reporter: as for the chinese delegation, they are also seeking reassurance in these talks that the u.s. will raise the debt ceiling in august and then get its massive deficits under more control. darren gersh, "nightly business report," washington. >> tom: taming inflation is a big challenge for china, and it's at the top of that government's agenda. doing so means cooling a red-hot property market and bringing down the prices increases of
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lots of everyday items. and, as nick mackie reports, that can be a tall order. >> in chongqing's backwater county of pengshui, some thousand miles from beijing, there are few obvious signs of an overheating economy-- that is, until you speak with the likes of noodle trader xu lunping. >> ( translated ): everything has gone up. we used to pay 93 yuan for a gas canister, now it's 100. meat prices have gone up also. all food has gone up in price including cooking oil, rice-- we used to pay 1.8 to 1.9 yuan for half a kilo, now it's more than two yuan for okay-quality rice. >> reporter: january's consumer price index rose 4.9% year-on- year-- food alone much higher. inflation is china's fall-out from its $4 trillion stimulus package, which cushioned china's export-reliant economy from the global financial crisis. according to patrick chovanec, of tsinghua university school of economics and management, this stimulus opened the floodgates for huge levels of bank lending,
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and much of this cash is now parked in assets like real estate, even gold. >> when you see over 50% in the money supply, the question isn't, "why is there inflation?" the question is, why isn't there more inflation? why haven't we seen it sooner? the reason is because a lot of that money didn't go into a consumption boom, it went into an investment boom. >> reporter: the government is now trying to rein-in investments, starting with the red-hot property sector. in many cities, home prices have doubled in two years and there's sufficient demand to keep prices rising and rising. but average salary earners are getting angry, as they can't afford to buy. so the government has intervened. some local authorities have blocked individuals from owning more than two homes or raised the down payment on second homes to 60%, while in shanghai, and here in chongqing, higher-end homes are now subject to an annual property tax. the people's bank of china has also weighed in.
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since october last year, it's been raising the benchmark interest rate and the bank reserve requirement ratio. the central government actually wants to go beyond real estate and restructure the whole economy, starting with cooling china's envy-of-the-world g.d.p. growth to 7%, plus have the country less reliant on exports and fixed-asset investments, more on family spending. in the regions, this poses a problem. take pengshui, which is building a new billion-dollar city center on this farmland. 60% of the funding comes from bank loans. all of china's provinces have already published their own five-year plans, and most have double-digit g.d.p. growth targets, driven by increasing levels of investment in fixed assets. so, from restructuring the economy to tightening money supply, the central government could soon face resistance. >> chinese policy-making is more like trying to herd cats. whether it's trying to get the state-owned enterprises to obey the dictates from beijing or
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trying to get the provinces or municipalities to go along with the game plan that beijing is trying to set, it's actually hard to get them in line. >> reporter: china's leadership is serious about cooling key sectors and rebalancing the world's second largest economy. but while the political system here is certainly authoritarian, it's not entirely top down-- so beijing's will doesn't always prevail. nick mackie, "nightly business report," chongqing. >> susie: in other overseas news, cuba is studying plans to let its citizens travel abroad as tourists for the first time in more than 50 years. that's one of more than 300 reforms published today by that country's government. other changes include the private sale of property and cars. the moves are part of a major shakeup of cuba's economy. so far, no word on when the proposals will go into effect.
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>> the rest of the week it is really going to be depend on economic data and what happened to oil prices. particularly that earning season is over. >> tom: we had so much to absurd last weekending with the jobs report, lots of volatility in the market it is nice to see a quiet monday for lots of investors here, susie, let's go ahead and roll with tonight's market focus.
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after last week's sell-off, commodity prices bounced up today, led by oil and silver. we first roll out the past 90 sessions of front month crude oil. prices jumped today after last week's precipitous fall. we dipped below $100 per barrel on friday, but today's buying brings us back over that mark. oil giants chevron and exxon each caught some stock bids, moving up from six-week lows. independent oil producer cabot was the energy sector leader with its 5.5% rally. silver was the other commodity that saw a big drop last week. today it regained a little of what it lost, not a lot, up more than 5%.
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it has come a long way. the sell-off last week had silver holding the low from mid- march. responded to the metal move and silver miners meantimes responded to the metal move and earnings. hecla mining jumped almost 7% on better-than-expected earnings. silver wheaton regained about 3%. its first-quarter earnings and revenues were records. coeur d'alene fell 2.6% thanks to disappointing results. now perhaps some relief buying came with the u.s. dollar weakened a fraction. this is just the past 30 sessions, showing the volatility as of late. the move down clearly that we've seen. last week's commodity selling picked up as the dollar rose. the greenback fell a fraction today, helping commodity prices. alcoa also led the dow industrial gainers, popping 2%. here the best one. volume was lighter than average though. the next challenge for alcoa shares is $18, a level it hasn't traded over since the fall of
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2008. it announced a new aluminum siding product today that fights smog. look for that on the product market come june. some merger talk also helped the broad market. car rental firm hertz global is making another play for competitor dollar thrifty. hertz has increased its buyout offer to $2.1 billion in cash and stock. the avis had the highest bid until today, but it's not known if avis will increase its price with the higher hertz offer. look at the new dollar thirfty stock chart. this new hertz offer values dollar at $71.85, based on tonight's closing prices. in september, dollar shareholders officially rejected hertz's previous offer, which was close to $50. we're well over that now. dollar stock is close to $80 per share, indicating the market thinks a higher offer will be coming. and stocks of the two bidders
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made smaller moves-- and in opposite directions. avis has been waiting for regulatory okay before moving ahead with its lower-priced offer. those shares keeping a fractional gain. research in motion stock keeps sinking, falling another 2% today. volume tripled on this drop. it takes rimm stock back to levels last seen in september. two analysts cut their price targets over worries ranging from losing market share in the smartphone market to even a potential rimm bid for technology patents owned by nortel networks. and the impact that could have on rimms balance sheet. and that's tonight's "market focus."
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>> tom: the $9 billion business of the n.f.l. remains at a dead stop. players are pushing for their paychecks to continue, since the league will continue to collect from sponsors. tonight's "beyond the scoreboard" begins with the billion-dollar battle. rick horrow is a sports business analyst and c.e.o. of horrow sports ventures. nice to see you again. so we've got nbc and comcast, cbs, fox, espn and disney all have paid the money for the nfl season for the rights to broadcast it. the players want a portion, likely will go to court this week or next week to fight for that seems like the only losers in this will be the sponsors and shareholders. >> the losers are everybody. when you add up the contracts, with the media, over $17 billion and they don't want to lose one dollar of that. and the problem is sponsors are tied in with advertisers, tides into the media companies. by the way, judge nelson begins her mediation again at the courthouse steps next week. both sides want some progress. i predict substantial
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progress will begin to be made. >> tom: but there is a lot on the line if they don't debt the season, a lot of the revenue won't be coming in. >> of course that is true. not only with the fans and players but also the stadium and communities. advertisers tied into the media, tied into the nfl, to the sponsors, it's all vertically integrated and connected. they just have to play the game. >> tom: they do. at&t, ma bell was the biggest single sports spender on advertisement last year coming in at just under half a billion dollars. take a look at these numbers, $429 million spent by at&t. only the second time in 17 years budweiser was not in the top five. verizon number three and ford coming in at number four, over $300 million. lots of telecom spending here. what about at&t's proposed buyout of t mobile what could it mean. >> a lot of money and a vertically end grated approach to advertising what we have never seen. at&t, the masters, coveted property. t mobile, nba, coveted property. you'll see the demographics late out over an ordinarily
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process with all of those major event cross promoted with everything else. >> tom: last year you had the olympics, the world cup, an nfl season. who knows this year if you have that. thing cobs different this year. >> but i keep saying on your show it is the beginning, the end of the recession. so the bottom line is we now have dollars flowing in that they didn't before. the automakers with substantial dollars and the post tarp run in the other way, financial institutions are all back in the advertising roster. >> tom: hp meantime is going for a tk corporation. how about this strange partnership for sponsorship. the sweet science of boxing with manny pacquaio, the new spokesman for hewlett packard. odd bedfellows. >> that guy you don't trust with your computers but the bottom line of all of this is it is a substantial investment to someone that's very popular domestically and internationalically. look. contractors are shorter. naler-- smaller, easier to terminate after a lot of problems. you don't also want a guy who may lose his voice if he just gets hit in the face. >> tom: good point. rick hor owe, you know a lot
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about that-- horrow from horrow sports ventures. >> susie: here's what we're watching for tomorrow: quarterly results from walt disney and wendy's/arby's group. we'll also see wholesale trade for march. and do tech companies violate your privacy when they track your location using your mobile device? that's one of the questions to be covered tomorrow during a congressional panel hearing on mobile privacy. more problems for ford's f-150 pickup, this time in the vehicle's fuel tank. transportation officials are looking at the steel straps that hold the tank in place on the 1997 through 2001 model years. there are reports those straps rust and break, letting the fuel tank fall and catch fire. ford is helping with the investigation. last month, more than a million 7 f-150s were recalled because of airbag problems. >> tom: from trucks to trains. uncle sam is shelling out $2
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billion to develop high-speed rail travel in the u.s. the cash will go to amtrak, and 15 states-- mostly in three locations, the northeastern corridor, california and the midwest. the obama administration wants to ramp up high-speed rail and has already spent $10 billion on projects around the country. the president wants to earmark another $53 billion for similar efforts over the next six years.
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>> susie: increasing the u.s. debt ceiling is next on washington's to-do list. lawmakers are expected to boost the country's $14 trillion spending limit by august, but not before a big debate over cutting government spending. tonight's commentator has his own set of debate rules. he's doug holtz-eakin, president of the american action forum and former director of the congressional budget office. >> jobs, less debt and a secure safety net. those are doug's rules for the debt limit debate. and there will be a debt limit debate, even though, in the end, congress will raise the debt limit. because it must. as stewards of the nations credit rating, it must pay for obama's fiscal extravagance. but between now and then, expect a confused and confusing debate, angry rhetoric, lots of finger- pointing and a heavy dose of brinksmanship. honestly, a vigorous debate is needed. underneath raising the debt ceiling is the imperative to back away from a financial
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armageddon and toward a future of faster job growth, less federal debt and a more secure safety net. nothing is more important defeating the debt threat, but there need to be ground rules for the debate. my kind of rules. the house passed a budget that contained pro-growth tax reform, preserved medicare and medicaid, and moved us from borrowing $58,000 every second to being free of federal debt in 2050. jobs, less debt and a more secure safety net. the house budget has been demonized as an attack on seniors and the poor, but opponents-- led by the president and nancy pelosi-- have decided to offer no plan. no jobs, more debt a broken safety net. that cannot be part of the debate. if you don't like the house budget, let's see your plan. but play by the rules. jobs, less debt and a secure safety net. i'm doug holtz-eakin. >> susie: and finally tonight, with tongue firmly in cheek there's a new study out showing babies are remarkably similar to
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c.e.o.s! for example, both think the world revolves around them. both babies and c.e.o.s believe they can wake up other people at any time and ruin other people's weekends and vacations. they both can freak out or fly into a rage, scaring other people. and both are taken everywhere in vehicles designed strictly for their comfort. tom, the study was done by the national association for serious studies. it's a creation of the "fortune magazine" writer whose pen name is "stanley bing," but who's really gil schwartz. they can both be awfully expensive too, awfully expensive. that is nightly business report for this monday, may 9th. thanks for joining us. have a great night, susie. >> susie: same to you, tom. thanks for watching and tom and i hope to see all of you again tomorrow night.
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this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh >> more information about investing is available in "nightly business report's" video "how wall street works". to order this dvd, call 1-800- play-pbs or visit online at >> be more. pbs.
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